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When working with the private sector, due diligence is a must © Shutterstock

Importance of due diligence when working with the private sector
The UN has built up partnerships in the business sector for years that align with its values, principles, and ethical standards
1 Apr 2024

The concept of partnerships as a vehicle through which the United Nations can facilitate actions to achieve development goals, has evolved over decades. The United Nations and the private sector have been actively collaborating around the world to address pressing issues.

Member states have reaffirmed the importance of business sector partnerships as a vital and critical component to accomplish the Sustainable Development Goals (SDGs). In this regard, the private sector plays a pivotal role in advancing the 2030 Agenda for sustainable development.

In an era of increased global complexity and interconnected challenges, the United Nations recognizes the value of collaboration with the private sector to address global issues effectively. However, with this collaboration comes the responsibility to ensure that partnerships align with the UN’s values, principles, and ethical standards. Due diligence emerges as a critical component in mitigating risks and fostering responsible and sustainable engagement between the UN and the private sector.

The December 2017 Report by the Secretary-General called for a coherent and streamlined approach on due diligence standards and procedures across the United Nations system to step up the scale and scope of partnerships with the business community.

Potential risk

Failure to ensure the appropriateness of the private sector collaboration poses a high reputational risk to the organization. As the UN aims to scale up its engagement with private sector businesses, it needs to do so in a way that optimizes the benefits of collaboration, manages potential risks, and ensures the organization’s integrity, independence, and impartiality. This can be accomplished using a proper due diligence process for potential partnerships and/or donors from the private sector.

The UN’s collaboration with the private sector aims to better address global issues © Freepik

Due diligence

In general, due diligence can be described as the process of thoroughly reviewing, assessing, and verifying the background, practices, and intentions of potential partners. In the context of UN and private sector collaborations, due diligence serves as a safeguard, allowing the organization to make informed decisions, manage risks, and uphold its commitment to integrity and accountability.

1. Ensuring alignment with UN values: 

The UN is guided by principles such as human rights, environmental sustainability, and social responsibility. Due diligence enables 

the organization to assess whether potential private sector partners or donors share these values and are committed to upholding them in their operations. This alignment is essential for the success of partnerships that aim to contribute positively to global challenges.

2. Mitigating risks: 

Collaborating with the private sector introduces various risks, including reputational, legal, and ethical concerns. Due diligence helps the UN identify and assess these risks, allowing the organization to make informed decisions about engagement. Thorough scrutiny of a potential partner’s ownership, track record and practices help prevent associations that could compromise the UN’s credibility or contribute to adverse impacts.

3. Ensuring ethical business practices: 

The UN places high importance on ethical conduct and transparency. Due diligence allows the organization to evaluate the business practices of potential partners, ensuring that they adhere to ethical standards, labor rights, and anti-corruption measures. This scrutiny is crucial to fostering a partnership that aligns with the UN’s commitment to integrity.

4. Safeguarding against conflicts of interest: 

Due diligence is instrumental in identifying and managing potential conflicts of interest that may arise during collaborations with the private sector. Ensuring that there are clear mechanisms in place to address conflict helps to maintain the UN’s independence and impartiality. It also prevents situations that could compromise the organization’s ability to act in the best interests of the global community.

Guidance

The United Nations Sustainable Development Group (UNSDG) issued a concept note that proposes an efficient and flexible due diligence approach that can be applied across the UNSDG members. It considers different priorities and specific mandates established for organizations and should be viewed as a basic framework for due diligence. It sets the UN Global Compact Ten Principles, the UN Guiding Principles on Business and Human Rights, and other integrity and sustainability standard benchmarks, which many UN partnerships with the private sector could consider evaluating.

In addition, the concept note outlines a series of action-oriented guidelines that UNSDG members may consider to protect and project UN credibility. The approach recognizes that UN organizations will need to retain the flexibility to further develop specific systems adapted to their individual needs and internal decision-making processes.

The concept note includes a minimum standard for engaging with the business sector and offers concrete guidelines on how to approach due diligence as a process. The proposed framework for a common due diligence approach outlines three subsequent types of due diligence criteria to guide UN entities in their identification of prospective partners, considering risks and opportunities:

1. A small set of exclusionary criteria which would be applied to partnership engagement between the United Nations and the private sector.

2. A set of preferred partner attributes to help identify business sector actors who demonstrate their commitments and efforts in support of the SDGs or responsible citizenship. These must consistently incorporate international standards, such as those from the UN Global Compact 10 principles and the UN Guiding Principles of Business and Human Rights.

3. A focus on businesses or operations exposed to, or creating higher environmental, social and governance (ESG) risks that may require a more thorough due diligence and risk-managed approach by the UN before considering any type of engagement.

The United Nations Controller issued revised Guidelines for the Acceptance of Voluntary Contributions on 13 July 2022. The guidelines include specific procedures for vetting of private sector donors and important considerations during the negotiation of voluntary contributions.

Conclusion

As the UN continues to engage with the private sector to address global challenges, due diligence stands as a crucial safeguard to protect the organization’s integrity, credibility, and commitment to its principles. Through a robust due diligence framework, the UN can navigate complex collaborations, identify potential risks, and ensure that partnerships and donations contribute positively to the organization’s mission. By prioritizing due diligence, the UN paves the way for responsible and sustainable engagement with the private sector and protects the reputation of the organization.

It takes years and years of hard work for an organization, including the UN, to build and demonstrate, by example, its principles and trustworthhiness, and to establish their reputation. However, it only takes one bad incident to shatter that trust and reputation, so it is critical for all entities to conduct proper due diligence for any and all engagements with the private sector.

UN Entities should continue to be guided by the Controller’s Note of 13 July 2022 and the Guidelines for acceptance of voluntary contributions. The UN Ethics Office provides advice and assistance on due diligence; requests can be addressed to ethicsoffice@un.org 

* Rick Sanchez is Head of the Protection Against Retaliation, Outreach, Training and Due Diligence Unit of the UN Ethics Office at UNHQ, New York.
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